Tips on Processing Motor Vehicle Purchases and Sales

As we get close to the end of the financial year, we hope that our tips on coding and processing are useful and help you avoid some common errors.

Purchases

If you are looking to purchase a motor vehicle for your business, generally this purchase will have GST in the purchase price. There is however an upper limit on the cost you can use to work out your GST claim and depreciation claim.

The car limit for 2018-19 is $57,581.

The maximum GST that you can claim is 1/11th of this amount, i.e. $5,234

When you process a car over the limit in your BAS, enter the car limit at label G10 and the GST credit of $5,234 at 1B. The amount over the cost limit is not entered onto your BAS. Most businesses can split the transaction in their accounting system using taxable and non-taxable codes to allow for the BAS reporting shown above.

The motor vehicle’s original cost can be established by breaking down the purchase invoice into asset items that are taxable, such as the vehicle and dealer delivery charges and non-taxable items such as stamp duty. Any items that are an ongoing or maintenance cost will not form part of the assets original cost and therefore be recorded as an expense, i.e. registration.

There is no GST included in the stamp duty component of the purchase. This portion will be recorded using a not reportable or BAS excluded code within your accounting system.

Trade-ins and Sales

The sale of a motor vehicle is generally treated as a taxable sale.

This is particularly important on vehicles that are traded in. Not accounting for GST on a traded vehicle is a common GST error. The trade in should be recorded at G1 on your BAS and the GST collected at 1A.